Rising unemployment is creating serious financial problems for the government, making it likely that jobless insurance premiums will be increased. In fact, Health, Labor and Welfare Minister Chikara Sakaguchi suggested the other day that the premium rate would be raised on an emergency basis, perhaps by the end of the year. He also indicated that unemployment benefits would be curtailed.
That is not all. The health ministry reportedly believes that another premium increase next April may be unavoidable if the jobless rate does not fall. The last time the rate was revised upward was April 2001. Clearly, the unemployment insurance system is on the brink of bankruptcy; it has been bleeding red ink since fiscal 1994. The ministry says the reserve may be depleted by the end of fiscal 2003.
Unemployment insurance has two principal aims: paying allowances to jobless people, and financing projects to stabilize employment. One-fourth of the funding for jobless benefits is supplied by the government, and the rest is split equally between employers and workers. Job stabilization projects are funded entirely by employers.
Premiums collected from company employees — which are used to pay jobless benefits — account for 1.2 percent of monthly salaries. Actually, the premiums are paid equally by employers and employees at the rate of 0.6 percent each. The average number of jobless people receiving benefits has topped 1 million a month since April, reflecting a record rise in the jobless rate. That far exceeds the ministry’s conservative estimate of 800,000 a month for fiscal 2002.
Thus jobless claims are expected to outstrip premium revenues yet again in the year to March 2003, with the deficit surpassing the initial forecast of 350 billion yen. The reserve, which stood at 4.7 trillion at its peak, is expected to hit a low of 100 billion yen at the end of fiscal 2002 and disappear completely by the end of fiscal 2003.
According to plans being studied by the ministry, the premium rate would be raised by 0.2 percent on an ad hoc basis, perhaps as early as October. If the job situation does not improve, the rate would be raised by another 0.2 percent next April, bringing the new rate to 1.6 percent. Simple arithmetic shows that a 0.2 percent increase will bring about 300 billion yen in extra premiums.
There is a technical reason to split an annual rate increase in two: Boosting the rate by more than 0.2 percent at a time requires a change to the unemployment insurance law. In other words, an increase of 0.2 percent or less can be carried out at the government’s discretion without revising the law. Were it not for this legal limitation, the ministry probably would have gone for a one-shot boost of 0.4 percent.
To meet the crisis in jobless insurance, the ministry is also studying plans to cut benefits, which currently equal 60 to 80 percent of what a jobless person earned a month before losing his or her job. These amounts are payable for up to 330 days. This has created a paradox of sorts: A person who used to draw a high salary is better off receiving benefits than taking a new job that pays less. However, a deep cut would not only threaten the lives of jobless people but also create distrust in the job insurance system itself.
Also under consideration are plans to cut wage subsidies to businesses that continue to employ elderly workers aged 60 to 65. Additionally, the ministry is reviewing the benefits for workers who have left their jobs because of age limits or marriage.
Labor and business groups contend that cutting jobless benefits at a time of high unemployment is unrealistic. For the same reason, they are also opposed to increases in the premium rate. “The government is trying to pass the buck to businesses and workers,” says an official of the Japanese Trade Union Confederation. “It’s important to re-examine the benefits to people who quit for reasons such as marriage, but it’s also necessary to promote vocational training,” says an executive of the Japan Business Federation.
Officials of the two groups argue that the government should assume a higher burden by boosting its share of jobless payments on a temporary basis. Funding required for these allowances is estimated at nearly 3 trillion yen — a sum much smaller than the amount of public money that has been poured into debt-burdened banks. Unemployment relief has a direct bearing on people’s lives. With job prospects uncertain, an ad hoc increase in such government spending seems warranted.
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